Dr Jeff Cornwall

So what’s worrying small business owners? Inflation!
While the Federal Reserve is focused on the problems of the large banks, small-business owners are worried about inflation according to the National Federation of Independent Business December Small Business Economic Trends report released today. Plans to raise prices to respons to higher costs rose from 21 percent in September to 26 percent of all owners in December.
“The historic relationship between inflation and the percent of owners reporting higher prices suggests that inflation will be showing some new, unwanted viability,” said NFIB Chief Economist William Dunkelberg.
Unadjusted, 27 percent of small-business owners surveyed reported raising average selling prices, up three points from November, and 12 percent reported lower selling prices, unchanged. This price cutting phase has lasted well over a year.
In case you didn’t believe me when I wrote my last post on my fear of renewed inflation, please take another look at it given this new development.
I am not guaranteeing that we will have a period of sustained inflation, but the risk is real enough to cause me great concern. My concerns have grown even stronger over the past few weeks with some of the talk in Washington about the need for an economic stimulus. If the politicians move in this direction, the odds of serious inflation and all of the pain it will create goes up considerably. Stimulating spending during potentially inflationary times like these is like throwing gasoline on the fires of inflation that are already burning due to oil prices, a tight labor market, and soaring grain prices.